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Indonesia to seek wider access to Japan in trade deal review

Publication Date : 11-04-2014

 

Indonesia expects to sell more value-added products to Japan as it is asking its East Asian nation counterparts to return to the negotiating table for a bilateral trade deal review.

Indonesia has yet to reap the ultimate benefits from the Indonesia-Japan Economic Partnership Agreement (IJ-EPA), which has been implemented for more than five years, due to tariff and capacity building issues.

Better access for various industrial goods, agricultural products and fisheries output will be necessary to improve Indonesia’s trade with Japan, according to Trade Minister Muhammad Lutfi.

At present, trade barriers still include higher import duties charged by Japan on certain Indonesian products compared to those shipped into the East Asian country by Indonesia’s rivals.

For example, fishery products from Indonesia get bigger import duties than similar products from the Philippines and Thailand.

“What we’ve given to Japan is bigger in value than what we’ve gotten from them,” said Lutfi, a former Indonesian ambassador to Japan.

“Therefore, in this review we want to achieve a more balanced ‘give and take’,” he said, without giving the time frame when negotiations on the trade deal review would be carried out.

Indonesia enjoyed an overall trade surplus of US$7.8 billion with Japan last year, particularly driven by its sizeable outbound shipment of oil and gas.

But its non oil and gas trade was in the red with a deficit of $2.97 billion due to huge imports of capital goods and industrial products.

Two-way trade amounted to $46.37 billion as exports totaled $27.08 billion and imports stood at $19.28 billion last year.

Research by the Centre for Strategic and International Studies (CSIS) released last year suggests that Indonesia has yet to gain the maximum benefits from the IJ-EPA due to a lack of product diversification, which prevents it from taking advantage of an enhanced market access.

Garment and textile, footwear, food processing, pulp and paper and fisheries are the some of the key sectors that have not enjoyed a significant upward trend in shipments to the world’s third-largest economy.

Those sectors have obtained reduced tariffs under the deal, but not to zero percent as other sectors received.

The iron and steel, automotive, electronics and chemical industries are among the sectors that mostly received zero duty enabled by the trade pact.

Apart from concerns over trade, Indonesia would also address the ineffectiveness of the capacity-building assistance scheme from Japan that was meant to help strengthen Indonesia’s manufacturing industry, Lutfi said.

Under the IJ-EPA’s aid through the Manufacturing Industrial Development Center (MIDEC), Japan has vowed its contribution to enhance the competitive edge of Indonesia’s manufacturing sectors, namely metalworking, tooling technique, welding technique, automotive production, textile, petrochemicals, oleochemicals and energy conservation.

Indonesia had mulled proposing the establishment of an educational institution in cooperation with Japanese stakeholders that eventually could benefit them in the country, Lutfi added, citing the Thailand Automotive Institute as an example.

Japan has been one of the biggest foreign direct investors in Southeast Asia’s largest economy.

Last year, it poured $4.7 billion, representing 16.5 per cent of total investment, making it the largest spender.

Separately, Industry Minister MS Hidayat expressed a similar view on improving the capacity-building aid scheme from Japan.

“The capacity building assistance from MIDEC has not run well and we want them to fix it,” he said, adding that he had sent a letter to the Japanese government asking for a trade deal review.

 

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